View From the Top - Heptagon Capital – Production

Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the…

View From the Top

Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation.

View from the very top: in an historic event that will have profound ramifications politically, economically and for financial markets, the UK has voted to exit from the European Union. Inevitably there will be (at least temporary) negative consequences for risky assets and this will likely prompt a flight to safety, even if buying opportunities do occur over time. We have counselled for some time growing allocations to truly uncorrelated asset classes, and our conviction in this respect has only grown.

The decision for the UK to seek to end its 43-year membership of the European Union should not be considered a black swan event since the scenario had been discussed for many months. While the world will clearly not come to an end, regardless of one’s political standpoint, it has undoubtedly become more risky. Moreover, the negative consequences of this decision will clearly extend beyond the UK.

The British Government is not legally bound to accept the result of the referendum since it is technically just a consultative process. Nonetheless, the decision of David Cameron to stand-down suggests that it will abide by the result. Under any scenario, however, the genie is out of the bottle. A clear disconnect has arisen between a frustrated population and the political establishment, where fears over migration have trumped the economic uncertainties of exiting. The repercussions will be widespread across the rest of the continent, with the EU now facing a fundamental identity crisis. Other member countries will likely follow suit in seeking referenda, elevating overall risk levels.

The question, therefore, is not whether risk assets fall, but by how much, and to what extent Central Banks react. A few things at least, seem clear. First, the risk of a recession in the UK and also the broader EU has risen. The UK had outperformed almost all other western economies in terms of GDP per capita growth since joining the EEC in 1973. Now, it will likely be poorer, more isolated and somewhat at the mercy of its larger European neighbour over whose affairs it is forsaking influence. Next, greater uncertainties will keep Central Banks positioned towards an easing bias. Indeed, the market is now discounting that the Fed will not raise interest rates for the next two years. Meanwhile, the Bank of England will also likely look to cut rates at its next meeting. Finally, volatility levels will likely remain elevated, especially given the many unanswered questions that have arisen as a consequence of this decision.

In terms of how to position, given that we are now entering an era of elevated risk, the logic for investing in genuinely uncorrelated asset classes continues to strengthen. We have advocated for some time the case for catastrophic reinsurance, infrastructure assets, direct lending and private equity. Equities, in broad terms, will likely come under pressure, with fixed income and gold correspondingly benefiting. Such a seismic Brexit decision will, however, also create opportunities over time. For now, we would prefer to be prudent, since the summer will likely bring further uncertainties.

Alexander Gunz, Fund Manager, Heptagon Capital

Disclaimers 

The document is provided for information purposes only and does not constitute investment advice or any recommendation to buy, or sell or otherwise transact in any investments. The document is not intended to be construed as investment research. The contents of this document are based upon sources of information which Heptagon Capital believes to be reliable. However, except to the extent required by applicable law or regulations, no guarantee, warranty or representation (express or implied) is given as to the accuracy or completeness of this document or its contents and, Heptagon Capital, its affiliate companies and its members, officers, employees, agents and advisors do not accept any liability or responsibility in respect of the information or any views expressed herein. Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. Where this document provides forward-looking statements which are based on relevant reports, current opinions, expectations and projections, actual results could differ materially from those anticipated in such statements. All opinions and estimates included in the document are subject to change without notice and Heptagon Capital is under no obligation to update or revise information contained in the document. Furthermore, Heptagon Capital disclaims any liability for any loss, damage, costs or expenses (including direct, indirect, special and consequential) howsoever arising which any person may suffer or incur as a result of viewing or utilising any information included in this document. 

The document is protected by copyright. The use of any trademarks and logos displayed in the document without Heptagon Capital's prior written consent is strictly prohibited. Information in the document must not be published or redistributed without Heptagon Capital's prior written consent. 

Heptagon Capital LLP, 63 Brook Street, Mayfair, London W1K 4HS
tel +44 20 7070 1800
fax +44 20 7070 1881
email [email protected] 

Partnership No: OC307355 Registered in England and Wales Authorised & Regulated by the Financial Conduct Authority 

Related Insights

Featured Insights
Featured Insights01 June 2021

View From The Top

Just the beginning? Nobody knows…. Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. View from the very top: Whatever your view on inflation, on a core consumer CPI measure, there is no […]

Learn more
Featured Insights
Featured Insights01 May 2021

View From The Top

Goldilocks versus the bears Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. View from the very top: When markets are this benign, there are good reasons to be sceptical. Sure, it’s hard […]

Learn more
Featured Insights
Featured Insights01 April 2021

View From The Top

The waiting game Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. View from the very top: Something will have to give; we’re waiting to see what. We doubt it is possible to […]

Learn more

Get The Updates

Separated they live in Bookmarks right at the coast of the famous Semantics, large language ocean Separated they live in Bookmarks right

Disclaimers 

The document is provided for information purposes only and does not constitute investment advice or any recommendation to buy, or sell or otherwise transact in any investments. The document is not intended to be construed as investment research. The contents of this document are based upon sources of information which Heptagon Capital believes to be reliable. However, except to the extent required by applicable law or regulations, no guarantee, warranty or representation (express or implied) is given as to the accuracy or completeness of this document or its contents and, Heptagon Capital, its affiliate companies and its members, officers, employees, agents and advisors do not accept any liability or responsibility in respect of the information or any views expressed herein. Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. Where this document provides forward-looking statements which are based on relevant reports, current opinions, expectations and projections, actual results could differ materially from those anticipated in such statements. All opinions and estimates included in the document are subject to change without notice and Heptagon Capital is under no obligation to update or revise information contained in the document. Furthermore, Heptagon Capital disclaims any liability for any loss, damage, costs or expenses (including direct, indirect, special and consequential) howsoever arising which any person may suffer or incur as a result of viewing or utilising any information included in this document. 

The document is protected by copyright. The use of any trademarks and logos displayed in the document without Heptagon Capital's prior written consent is strictly prohibited. Information in the document must not be published or redistributed without Heptagon Capital's prior written consent. 

Heptagon Capital LLP, 63 Brook Street, Mayfair, London W1K 4HS
tel +44 20 7070 1800
fax +44 20 7070 1881
email [email protected] 

Partnership No: OC307355 Registered in England and Wales Authorised & Regulated by the Financial Conduct Authority 

Related Insights

Featured Insights
Featured Insights01 June 2021

View From The Top

Just the beginning? Nobody knows…. Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. View from the very top: Whatever your view on inflation, on a core consumer CPI measure, there is no […]

Learn more
Featured Insights
Featured Insights01 May 2021

View From The Top

Goldilocks versus the bears Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. View from the very top: When markets are this benign, there are good reasons to be sceptical. Sure, it’s hard […]

Learn more
Featured Insights
Featured Insights01 April 2021

View From The Top

The waiting game Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. View from the very top: Something will have to give; we’re waiting to see what. We doubt it is possible to […]

Learn more

Get The Updates

Separated they live in Bookmarks right at the coast of the famous Semantics, large language ocean Separated they live in Bookmarks right

GET THE UPDATES

Sign up to our monthly email newsletter for the latest fund updates, webcasts and insights.